Global sukuk issuance looks ‘uncertain’ for 2018, says S&P Global

While 2017 was a bumper year for global sukuk issuance, the outlook for Islamic bonds remains “uncertain” for the coming year, according to ratings agency S&P Global.

Global sukuk issuance in 2017 reached $97.9 billion, an increase of 45.3 percent, from the $67.4 billion recorded in 2016. The increase was underpinned by large issuances by GCC countries, particularly the $9 billion sukuk issued by Saudi Arabia in April. This remains the largest issuance globally to date.

“Driving this performance were good liquidity conditions in the GCC and, more generally, globally, as well as activity by some countries with the goal of further developing their Islamic finance industries,” said Dr Mohamed Damak, head of Islamic finance, at the ratings agency.

Non-GCC countries also contributed to the rise, said S&P Global, with Hong Kong tapping the market again last year and Nigeria issuing its first sukuk. Morocco and Tunisia are expected to issue sukuks this year, according to the report.

The report said while core Islamic finance countries will continue to have “significant” financing needs in 2018, the sukuk market could be held back by tightening global liquidity and rising geopolitical risks in the Middle East.

The report cited sanctions imposed on Qatar by a group of Arab states in June 2017, as well as continued animosity between Iran and GCC countries as factors that may undermine investor interest in the product.

It also suggested that the “slow progress” on standardizing Islamic finance products will limit the market’s potential. S&P Global expects issuance volumes to hover nearer $70-80 billion in 2018, according to the report.